Fitch Affirms PG&E's 'A-' Issuer Default Rating; Outlook Stable

NEW YORK--(Business Wire)--
Fitch Ratings has affirmed Pacific Gas & Electric Company's (PG&E) ratings as
follows:

--Long-term Issuer Default Rating (IDR) at 'A-';

--Senior unsecured notes at 'A';

--Preferred stock at 'A-'

--Short-term IDR at 'F1';

--Commercial paper at 'F1'.

The Rating Outlook is Stable. Approximately $9.2 billion of debt is affected by
the rating action.

The affirmation and Stable Outlook consider the utility's strong, relatively
predictable earnings and cash flows and a balanced regulatory/political
environment in California. The ratings and Stable Outlook reflect Fitch's
confidence in PG&E's ability to effectively execute, finance and recover its
large, projected capital spending budget which is expected to approximate $11
billion through 2011.

The ratings and Outlook also assume that regulatory mechanisms will continue to
facilitate timely collection of power supply and other costs and a reasonable
return on invested capital. These mechanisms include decoupling of electric and
gas rates from sales volume, pre-approval of construction spending, regulatory
balancing accounts and forward looking test years, which minimize earnings
attrition and ameliorate concerns regarding recovery of planned infrastructure
investment and other expenses. The ratings also assume that management will fund
its investment program with a balanced mix of debt and equity consistent with
its current capital structure.

On July 20, 2009, PG&E submitted a draft of its 2011 general rate case (GRC)
application to the Division of Rate Payer Advocates (DRA) of the California
Public Utilities Commission (CPUC) requesting a $1.069 billion (6.5%) rate
increase. The rate increase request is to recover PG&E's infrastructure and
reliability investment during 2011 - 2013. The utility also submitted a notice
of intent to file its formal application by Dec. 1, 2009. Following hearings and
issuance of an administrative law judge's proposed order in 2010, a final order
is expected to be issued by the CPUC before the end of the year, with new rates
effective Jan. 1, 2011. The filing also requests that the CPUC adopt new
flexible cost recovery mechanisms by establishing balancing accounts for several
categories of costs, including new customer connections, uncollectible accounts
and employee healthcare costs.

Fitch notes that the CPUC in PG&E's last GRC authorized a $213 million 2007
test-year rate increase, based on an 11.35% authorized return on equity and a
52% equity ratio. In addition, the commission order in PG&E's 2007 GRC approved
post-test year inflation rate increases of $125 million in 2008, $160 million in
2009 and $90 million in 2010. PG&E is expected to file its next cost of capital
proceeding with the CPUC in 2010 to be effective Jan. 1, 2011.

Liquidity is strong at PG&E and the company demonstrated its ability to access
capital markets during the credit crisis, issuing $1.2 billion of senior
unsecured notes in the fourth quarter 2008. After amending its credit agreement
to remove Lehman Bank as a lender, the utility's revolving credit facility was
reduced to $1.94 billion from $2.0 billion, a $60 million reduction. The credit
facility backs PG&E's $1.75 billion commercial paper program.

As of March 31, 2009, PG&E had $385 million of commercial paper outstanding at
an average yield of 1.15%, $295 million of letters of credit outstanding and $54
million of unrestricted cash and cash equivalents on its balance sheet.

On June 8, 2009, PG&E issued $500 million of floating rate notes (FRNs) that
mature June 10, 2010. The interest rate is three-month LIBOR plus 95 basis
points and will be reset quarterly on Sept. 10, 2009, Dec. 10, 2009 and March
10, 2010. Proceeds from the FRNs will be used to fund procurement-related
collateral and margin requirements.

PG&E is the primary operating subsidiary of its corporate parent, PG&E
Corporation (PCG). PG&E is one of the largest combination electric and gas
utilities in the U.S., serving 5.1 million electric and 4.3 million natural gas
customers in northern and central California. The utility accounts for virtually
all of PCG's earnings and cash flows and 94% of consolidated debt.

Fitch's rating definitions and the terms of use of such ratings are available on
the agency's public site, www.fitchratings.com. Published ratings, criteria and
methodologies are available from this site, at all times. Fitch's code of
conduct, confidentiality, conflicts of interest, affiliate firewall, compliance
and other relevant policies and procedures are also available from the 'Code of
Conduct' section of this site.

Fitch Ratings, New York
Philip W. Smyth, CFA, +1-212-908-0531
Ellen Lapson, CFA, +1-212-908-0504
Media Relations:
Cindy Stoller, +1-212-908-0526
cindy.stoller@fitchratings.com

Copyright Business Wire 2009